Costas Evripides, Chief Executive Officer, GENESIS Pharma SA
Biotechnology offers great prospects, but turning a scientific breakthrough into a commercially viable product is a great challenge. To be able to develop and market a revolutionary biotechnology product you need to treat it with the business respect it deserves.
For more than two decades now, the world has witnessed the rapid evolution of biotechnology. The figures in the slides give you an idea of how important biotechnology has become both for our everyday lives and the economy at large. It has been said that biotechnology is the next wave of the knowledge economy. We are here to review what it was that made biotechnology an important business sector and see how this can evolve in the 21st century.
Since the 1980s, business models for biotechnology companies have had to evolve, adapting to changing market needs. As you can see from the schematic presentation of the Biotechnology Value Chain, there are considerable gaps that need to be filled, both technological and financial, in order to be able to turn basic research into a marketable biotech product.
All of us involved in biotechnology, whether a scientist or an entrepreneur, share one common vision: to produce innovative medicines for the treatment of medical conditions that could not be treated in the past, thus improving the quality of life for thousands of people. But developing medicines is not enough in itself; unless the products are marketed and distributed effectively, we won't be able to have a positive impact on the lives of the people in need. A concrete strategy and a viable business model are absolutely necessary for any biotechnological company that wants to make a difference.
A company needs to apply an effective business model to be successful in the market. Foe example, Amgen owns country subsidiaries in continental Europe, except for Southeastern Europe, where it has an exclusive partner, GENESIS Pharma. However, this model has not worked for other biocompanies. For instance, Biogen Idec, Chiron and Shire all license-out to partners for all European countries.
Finally, other companies opt for pan-European or regional out-licensing, thereby totally leaving Europe to their partners. Cubist, for example, has licensed out to Chiron for the whole of Europe. In conclusion, there isn't just one effective bio-business model. The rationale for choosing to engage in strategic alliances is rather simple: any company needs to get profitable quickly, and then grow its profits fast. Building a European subsidiary costs more than it used to, the market is more competitive, and the profits are smaller. Consequently, selling rights in Europe provides significantly more money that can be invested in the company's pipeline, which in turn increases the chances for continued profit growth as well as product approvals.
In the era of globalization and intense competition no company - irrespective of its size - can survive without a solid and penetrative sales network. I would suggest that any company that aims high needs should adopt a model by which core countries are serviced by the mother organization and all other countries are assigned to regional, strategic partners. This, I think, could be a bio-business model for success and this is how we can best provide for people in need through Europe.
The Value of Biotech Pharmaceuticals
- More than 800 million people have already benefited form new unique therapies. (Source: BIO Press Release, March 29,2005)
- More than 380 biotech products are in clinical trials for 200 different diseases.
- $47 billion, about 10% of the global pharmaceutical revenue in 2003 attributed to biotech products (Source: Ernst & Young Global Biotechnology Report 2004)
- More than 30% of global pharmaceutical pipeline in clinical trials is based on biotechnology
A business model for Europe
"Spread the expense, share the resources, manage the risks" but also share the rewards.
Source: BIO July - September 2005